[Code of Federal Regulations]
[Title 7 Volume 4]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR240.1]

[Page 247-248]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 240--CASH IN LIEU OF DONATED FOODS--Table of Contents
 
Sec. 240.1  General purpose and scope.

    (a) Each school year the Department programs agricultural 
commodities and other foods to States for delivery to program and 
commodity schools, nonresidential child care institutions, and service 
institutions pursuant to the regulations governing the donation of foods 
for use in the United States, its territories and possessions and areas 
under its jurisdiction (7 CFR part 250).
    (b) Section 6(b) of the Act requires that not later than June 1 of 
each school year, the Secretary shall make an estimate of the value of 
the agricultural commodities and other foods that will be delivered 
during that school year for use in lunch programs by schools 
participating in the National School Lunch Program (7 CFR part 210). If 
this estimate is less than the total level of assistance authorized 
under section 6(e) of the Act the Secretary shall pay to the State 
administering agency not later than July 1 of that school year, an 
amount of funds equal to the difference between the value of donated 
foods as then programmed for that school year and the total level of 
assistance authorized under such section.
    (c) Section 6(e)(1) of the Act requires:
    (1) That for each school year, the total commodity assistance, or 
cash in lieu thereof, available to each State for the National School 
Lunch Program shall be the amount obtained by multiplying the national 
average value of donated foods, described in paragraph (c)(2) of this 
section, by the number of lunches served in that State in the preceding 
school year; and
    (2) That the national average value of foods donated to schools 
participating in the National School Lunch Program, or cash payments 
made in lieu thereof, shall be 11 cents, adjusted on July 1, 1982, and 
each July 1 thereafter to reflect changes in the Price Index for Food 
Used in Schools and Institutions. Section 6(e)(1) further requires that 
not less than 75 percent of the assistance under that section shall be 
in the form of donated foods for the National School Lunch Program. 
After the end of each school year, FNS shall reconcile the number of 
lunches served by schools in each State with the number served in the 
preceding school year and, based on such reconciliation, shall increase 
or reduce subsequent commodity assistance or cash in lieu thereof 
provided to each State.
    (d) Section 12(g) of the Act provides that whoever embezzles, 
willfully misapplies, steals, or obtains by fraud any funds, assets, or 
property that are the subject of a grant or other form of assistance 
under this Act or the Child Nutrition Act of 1966, whether received 
directly or indirectly from the United States Department of Agriculture, 
or whoever receives, conceals, or retains such funds, assets, or 
property to his use or gain, knowing such funds, assets, or property 
have been embezzled, willfully misapplied, stolen, or obtained by fraud 
shall, if such funds, assets, or property are of the value of $100 or 
more, be fined not more than $10,000 or imprisoned not more than five 
years, or both, or, if such funds, assets, or property are of a value of 
less than $100, shall be fined not more than $1,000 or imprisoned for 
not more than one year, or both.
    (e) Section 14(f) of the Act provides that the value of foods 
donated to States for use in commodity schools for any school year shall 
be the sum of the national average value of donated foods established 
under section 6(e) of the Act and the national average payment 
established under section 4 of the Act. Section 14(f) also provides that 
such schools shall be eligible to receive up to five cents of such value 
in cash for processing and handling expenses related to the use of the 
donated foods.

[[Page 248]]

    (f) Sections 17(h)(1) (B) and (C) of the Act provide that the value 
of commodities, or cash in lieu thereof, donated to States for use in 
nonresidential child or adult care institutions participating in the 
Child and Adult Care Food Program (7 CFR part 226) for any school year 
shall be, at a minimum, the amount obtained by multiplying the number of 
lunches and suppers served during the preceding school year by the rate 
established for lunches for that school year under section 6(e) of the 
Act. At the end of each school year, FNS shall reconcile the number of 
lunches and suppers served in participating institutions in each State 
during such school year with the number of lunches and suppers served in 
the preceding school year and, based on such reconciliation, shall 
increase or reduce subsequent commodity assistance or cash in lieu of 
commodities provided to each State.
    (g) Section 16 of the Act provides that a State which has phased out 
its food distribution facilities prior to June 30, 1974, may elect to 
receive cash payments in lieu of donated foods for the purposes of the 
applicable child nutrition programs--i.e., the National School Lunch 
Program, the Summer Food Service Program for Children (7 CFR part 225) 
and the Child Care Food Program.
    (h) These regulations prescribe the methods for determination of the 
amount of payments, the manner of disbursement and the requirements for 
accountability for funds when these respective statutory authorities 
require the Department to make cash payments in lieu of donating 
agricultural commodities and other foods.

[47 FR 15982, Apr. 13, 1982, as amended at 52 FR 7267, Mar. 10, 1987; 58 
FR 39120, July 22, 1993]